British unemployment rockets to 17-year high

12th October 2011, 0 comments

Britain's jobless total has hit a 17 year-high, data showed Wednesday, stoking fears of a new recession and denting government hopes that the private sector can compensate for massive cuts in state jobs.

The number of jobless people jumped to 2.57 million in the three months to August, reaching the highest amount since late 1994, the Office for National Statistics (ONS) revealed.

Youth unemployment, or the number of 16 to 24 year-olds without a job, hit a record high of 991,000 in the three months to August and neared the psychological barrier of one million, the ONS added in a statement.

And the unemployment rate shot up to 8.1 percent during the quarter, the highest level for 15 years, while the numbers claiming jobseeker's allowance increased for the seventh month in a row to 1.6 million in September.

British Prime Minister David Cameron, whose coalition government is slashing public-sector employment as part of its austerity drive, described the latest data as "very disappointing."

However, he pledged once again that Britain would not deviate from the painful deficit-cutting measures, amid persistent turmoil on global financial markets over high levels of state debt -- particularly in the eurozone.

"Every job that is lost is a tragedy for that person and for their family and that is why this government is going to do everything it possibly can to help get people into work," he told parliament.

"We've got to do more to get our economy moving, to get jobs for our people but we mustn't abandon the (deficit-reduction) plan that has given us record low interest rates."

"If we changed course on reducing our deficit we would end up with interest rates like Portugal, like Spain, like Italy, like Greece, and we would send our economy into a tailspin."

Cameron's Conservative-Liberal Democrat coalition faced more vocal calls from the opposition Labour party to slow the pace of cuts and reduce the risk of a so-called double-dip downturn.

"I want you to change course so you have a credible plan to get people back to work in this country," Labour leader Ed Miliband said on Wednesday.

He added: "Month after month, as unemployment goes up, the number of people claiming benefits goes up, the cost goes up and fewer people are in work and paying taxes.

"To have a credible plan on the deficit, you need a credible plan for growth and you don't have one."

Cameron responded that the previous Labour government, which was ousted by the coalition in May 2010, had left them nursing a record public deficit.

Britain escaped from a deep recession in the third quarter of 2009 but its recovery has been severely constrained by collapsing consumer confidence, state austerity cuts and the eurozone debt crisis.

Wednesday's data comes less than a week after the Bank of England said it will inject £75 billion (86 billion euros, $115 billion) of new money into Britain's stalled economy in a bid to boost growth and prevent a return to recession.

The BoE already pumped £200 billion into the economy between March 2009 and January 2010, but the economy has struggled and over the past nine months it has virtually come to a halt.

BoE governor Mervyn King has warned that Britain is facing possibly its most serious ever financial crisis.

Capital Economics analyst Jonathan Loynes said that the sharp deterioration in the labour market data would ramp up the risks of another recession.

"While the labour market's previous resilience was one of the few sources of hope earlier in the year, its subsequent rapid deterioration now looks likely to exacerbate the weakness in the broader economy and increase the risks of a renewed recession," Loynes said.